BUDGET

Climate, energy programs could see boosts despite freeze

Katie Howell and Robin Bravender, E&E reporters

E&E Daily: Wednesday, January 27, 2010

Climate change and clean energy programs, which the Obama administration has championed, are expected to remain priorities at U.S. EPA and the Energy Department in the president's fiscal 2011 budget request despite a request to freeze non-military discretionary spending for the next three years.

In an effort to make a dent in the federal deficit, the White House announced its plan yesterday to freeze non-military, discretionary spending for the next three years. The proposal -- which would exempt some of the largest parts of the federal budget such as defense and entitlement programs -- would keep overall spending levels for the other discretionary programs at fiscal 2010 levels.

Concerns mounted yesterday about which agency programs will face the axe, but observers on and off Capitol Hill say several of the administration's top priorities will receive ample funding.

The freeze could potentially target key discretionary programs at U.S. EPA and the Energy Department. Because the budget would not increase with inflation, in practice the limit would essentially be a cut for some agencies.

The proposal is not an across-the-board freeze. The bottom line would stay flat, but the White House intends to increase some programs and decrease others, according to Rob Nabors, deputy director of the Office of Management and Budget.

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It will be up to lawmakers to decide whether to move forward with any spending cuts.

On the Senate side, key lawmakers on the Appropriations Committee said yesterday they support the idea of budget restraint but will have to examine Obama's proposals carefully, since many programs will need spending increases (E&ENews PM, Jan. 26).

Climate change

Because tackling climate change is touted as one of the Obama administration's top priorities, observers say a budget freeze is unlikely to starve programs aimed at curbing greenhouse gas emissions, even if it means squeezing cash out of other areas.

"I suspect, given this administration's agenda, that they will do all they can to protect the climate change money," said Rep. Mike Simpson (R-Idaho), ranking member of the House Interior and Environment Appropriations Subcommittee.

Simpson called Obama's announcement a step forward but said he would prefer an across-the-board freeze on federal spending and even cuts in some areas, particularly at EPA -- which received a significant funding boost last year.

Climate change programs at EPA, the Interior Department and the Forest Service received $385 million under the fiscal 2010 appropriations bill, a $155 million increase over 2009 levels. Overall, EPA received $10.3 billion for fiscal 2010, a 36 percent boost over 2009 levels.

Experts say the agency will need those funds to keep pace with pending greenhouse gas rules.

EPA Administrator Lisa Jackson has said that in her list of priorities, climate change is at the very top, said industry attorney and former EPA air chief Jeff Holmstead. "That's something where a tighter budget or a more limited budget or a less expansive budget could create some real problems," he said.

If carbon dioxide becomes a regulated pollutant, it will become a huge problem for industry because it will require more permitting resources, Holmstead said. And because EPA is already a permitting bottleneck, "that would really be a train wreck," he said.

EPA is expected to issue greenhouse gas standards for tailpipes by March. That standard is expected to trigger broad greenhouse gas permitting requirements for stationary sources, although EPA is soon expected to finalize a rule limiting those requirements to the largest sources.

Bill Becker, executive director of the National Association of Clean Air Agencies, said a budget freeze could have devastating effects on state and local air regulators but expressed confidence that the Obama administration would ensure that climate and air pollution programs have ample funding.

"These issues -- energy, climate, protection of public health -- are central to President Obama's agenda and are paramount to what EPA has been advocating," Becker said. "They will do everything in their power to ensure that sufficient resources are provided to meet these important objectives."

John Walke, clean air director at the Natural Resources Defense Council, said the agency will find a way to make its climate regulations work. "EPA is still a sizable agency, so it's well within [Administrator] Lisa Jackson's power to reassign resources to accomplish those regulations, and the regulations don't become any better or faster really by throwing a hundred people at them," Walke said.

One possibility for shuffling funds within EPA would be to slash some of the voluntary programs that were favored by the George W. Bush administration, Walke added.

"I think there is further room to restore some statutory-driven programs to historic levels and to diminish voluntary programs to levels in recognition with different priorities and a difficult economic climate," he said.

Clean energy focus

Rob Nabors, deputy director of the Office of Management and Budget, said the Obama administration has pored over previous budgets, and spending proposals for some programs will decrease while others will increase. "Clean energy" is one area where the administration will continue to make investments, he said (Greenwire, Jan. 26).

Programs within the Energy Department's Office of Science, like the Advanced Research Projects Agency-Energy, or ARPA-E, are likely to remain administration priorities.

"The secretary obviously values highly advanced energy technology research, and that's what ARPA-E is," said Mary Anne Sullivan, a partner at the Hogan and Hartson law firm in Washington, D.C., who represents clients who have applied for ARPA-E grants. "There's a premium on science and technology."

ARPA-E, which was first authorized in a 2007 energy bill to foster high-risk, high-reward research to curb energy imports and greenhouse gas emissions, received its first $15 million in funding in a fiscal 2009 spending bill and an additional $400 million in the stimulus package. But Congress did not appropriate any funds to the agency last year despite the administration's request for $10 million.

Even if the program is not funded for fiscal 2011, the stimulus boost will keep it going, observers say.

"Assuming that $400 million remains available, then the ARPA-E program would continue," said Bill Malley, a Washington-based partner at the Perkins Coie law firm. "The question is what happens after those funds are committed. If the budget is frozen, that could affect the program going forward."

But Sullivan disagreed.

"I would expect that ARPA-E would be funded, even at the expense of some other program," Sullivan said. "The levels have been small enough that you can continue to fund it without taking a huge chunk out of some other program."

The program so far has awarded about $4 million each to 37 innovative energy research projects, and DOE recently accepted applications for a second $100 million round of funding. ARPA-E has broad support from industry, on Capitol Hill, and within the administration.

Today, the House Science and Technology Committee convenes to push for reauthorization of the program, which is set to expire at the end of this year (E&E Daily).

And Energy Secretary Steven Chu has championed the program, pushing Congress last year to boost its funding so researchers can help solve energy problems without the usual bureaucratic delays.

"Under those circumstances, you can go really fast," Chu said last summer. "It's not about writing research papers anymore. ... Just like when venture capitalists invest, a large part of what they're investing in is people as well as the business plan" (Greenwire, Aug. 7, 2009).

Another DOE initiative that will likely keep its funding through a budget freeze is Chu's proposal to create energy "innovation hubs." His vision is to create an environment for scientists to work on major energy problems with minimal bureaucratic oversight. In its fiscal 2010 request, the administration called for creation of eight hubs in a variety of energy research areas, but Congress only appropriated funds for three.

And the administration is not likely to cut funding for those programs so soon.

"The DOE Energy Innovation Hubs represent a new, more proactive approach to managing and conducting research," Chu said last month. "We are taking a page from America's great industrial laboratories in their heyday" (Greenwire, Dec. 23, 2009).

Even if funding for certain projects is cut, the $39 billion in stimulus funding slated for DOE will keep many programs afloat, according to a lawmaker on the House Appropriations subcommittee that administers funds to DOE.

"Not that much has been spent," said Rep. Rodney Frelinghuysen (R-N.J.), ranking member of the Energy and Water Development Subcommittee. "It's a large cushion, and hopefully they'll do alright."

Sen. Byron Dorgan (D-N.D.), chairman of the Senate Energy and Water Development Appropriations Subcommittee, would not comment specifically on the future of clean energy research investment under a budget freeze.

"Well, I hope we have significant investment for that type of funding, but we will have to wait and see," Dorgan said.

Reporters Allison Winter and Katherine Ling contributed.

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